The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.

July 26, 2018 - 16:40 — Elizabeth Wright

Yesterday afternoon, the Centers for Medicare and Medicaid (CMS) released a notice of a proposed rule that would revise how Medicare would pay for outpatient drugs under the 340B drug discount program at off-campus hospital sites. Citizens Against Government Waste (CAGW) is pleased to see this proposed rule because it represents another needed reform to the 340B drug discount program that will save patients money and protect taxpayers.

The new rule extends the changes that CMS made in a November 2017 final rule to the Hospital Out Patient Prospective Payment System (HOPPS) for Medicare Part B drugs administered in a hospital outpatient setting. The price was changed from the average sales price (ASP) plus 6 percent to ASP minus 22 percent. CAGW wrote about this change in a November 7, 2017 Waste Watcher.

The new rule will extend this pricing to certain hospital off-campus sites, which were not included in the November 2017 rule. CMS was concerned that hospitals would have had the incentive to send their patients to these off-campus sites to receive the higher payment rate of ASP plus 6 percent.

In our November Waste Watcher, we wrote how hospitals (and now their off-campus sites) could absorb this payment change because according to a Medicare Payment Advisory Commission (MedPac) March 2016 report (page 76) “discounts across all 340B providers (hospitals and certain clinics) average 34 percent of ASP, allowing these providers to generate significant profits when they administer Part B drugs.”

Soon after the November 2017 rule was released, hospitals sued CMS, arguing the agency had no authority to change the payment rate. Just last week, after hospitals argued their case before the U.S. District Court for D.C. and the United States Court of Appeals for the District of Columbia, a three-judge panel said the hospitals lacked standing. CAGW wrote about the recent court decision in a July 18 Waste Watcher.

CAGW has long called for the reform of the 340B drug discount program. Originally designed to help poor, uninsured people get access to discounted drugs, the program has become a mechanism for hospitals to pad their budgets.

If this rule should be finalized, CMS has projected it will “save patients about $150 million in lower copayments for clinic visits provided at an off-campus hospital outpatient department.”